One of the first questions people often ask us is what is estate planning and why is it important?
Estate planning involves setting up a plan that establishes a clear procedure for questions like who would manage your affairs if you became incapacitated or passed away and who will eventually receive your assets after you pass away.
Estate planning is important for many reasons. Perhaps the biggest benefit is removing the uncertainty from who, when, and how your estate will be handled when you pass away or are no longer able to manage your own finances or healthcare. If you don’t properly prepare for what should happen in the future while you’re of sound mind and capable, you’ll have no say in how your care or your estate is handled or what, if anything, your loved ones receive when the time comes. Planning today ensures your future and your legacy is exactly how you envision it once it’s no longer in your control.
Like I alluded to, estate planning isn’t just for money and property. It is also critical in planning your wishes for incapacity and end-of-life decisions, such as designating someone you trust to make healthcare decisions if you are incapacitated and stating your desires for the extent to which life sustaining measures will be administered to you if your health is failing.
A properly prepared estate plan will lay out your wishes in the most advantageous way considering many factors like tax savings, protection from creditors, and how to allocate assets to incapacitated or underage beneficiaries.
Some of the Most Common Estate Planning Documents we use include:
- Wills: which are legal documents that expresses your last wishes, including guardianship for minor children. A will is the document that goes into court on your behalf whether for probate of an estate or for purposes of establishing a personal representative to manage your estate.
- Trusts: which are legal fiduciary agreements between parties: the grantor(s), the trustee(s) and the beneficiary(ies). By establishing these roles and directives in advance, trusts avoid probate court, unlike a will, and and allow your successors to administer your estate in a much quicker, simpler way.
- Financial Power of Attorney, gives someone the power to handle your property and financial affairs if you are no longer able to manage them yourself. Sometimes you’ll hear this referred to as a “Durable” power of attorney, which simply means that even if you become incapacitated, the document remains in effect.
- An Advance Healthcare Directive directly states what, if any, medical actions should be taken if you become incapacitated and unable to make your own decisions. It also allows you to designate someone as your medical power of attorney to make any other medical decisions that you are unable to make for yourself and haven’t already directed in the document.
- Finally, HIPAA Authorizations give your consent for your medical records and information to be shared with a third party. This is important in allowing your trustee or power of attorney to access protected information about your health if you have become incapacitated and they need to step in to manage your affairs.
Everyone needs an estate plan of some sort. You don’t need to be wealthy, or elderly, or even have a specific amount in your bank account to justify setting up a plan. We never know when we could become incapacitated and need another person to step in to help us manage our healthcare or finances. Even if you don’t have a lot of assets, your estate plan is a guarantee that everyone will know what your wishes are when the time comes and be able to assist you. You can also reserve the right to make changes to your plan any time you want.
Don’t leave life and death–and even after death decisions–up to the court. Planning lets you be in the driver’s seat. Take control and create a plan. If you have any additional questions about estate planning here in California, please feel free to reach out to our office, the McGovern Law Group.
